A Welfarist Role for Nonwelfarist Rules: An Example with Envy

by Matthew Weinzierl

Overview — The author proposes an argument for why policymakers should, as research has repeatedly shown most people do, consider multiple, often mutually contradictory principles when judging economic policy: we cannot fully understand a policy’s effects, so we use principles based on human experience to help avoid unforeseeable mistakes. This argument is a specific version of a more general point made over the centuries, but if accepted it would have broad implications for the modern approach to economic policy analysis. He provides an example of this argument in action, focusing on the controversial topic of the tax policy response to the existence of envy.

Author Abstract

I propose and formalize an argument for why economists working in the welfarist normative tradition should include nonwelfarist principles in how they judge economic policy. The key idea behind this argument is that the world is too complex, and our ability to model it too limited, for us to fully trace a policy’s effects on welfare. Nonwelfarist principles can be valuable to a welfarist facing this limitation if they act as informational proxies, carrying accumulated knowledge about the effects of policy that otherwise cannot be considered. This argument can be seen both as extending a familiar logic for rule utilitarianism beyond the realm of individual ethics and as a specific version of a broader argument made for centuries by theorists from Hume to Hayek. I also provide evidence of an example in which real-world policy judgments are consistent with this theoretical argument. Results from a novel U.S. opinion survey show that approximately half of respondents reject redistribution driven by envy even though it generates direct utilitarian gains. That share rises as the role of envy is made more salient, consistent with respondents using nonwelfarist principles to encode concerns about the unobservable consequences of policy.